TiCSA Tourism Barometer
June Quarter 2024
Realitybites!Highcost of living hasbecome aplagueuponthe tourism industry
The 2024 June Quarter Tourism Barometer showed activity fell back below the neutral level in the quarter following a sharp rebound in activity in the March Quarter. The Business Activity Index has now been below the neutral level for four of the last five quarters, reflecting the ongoing impact of higher interest rates, elevated inflation and lower household disposable incomes. Unfortunately, the Business Outlook Index remained below the neutral level in the June Quarter, reinforcing that the tourism industry is likely to continue to face significant challenges in the near-term. The sharp fall in the Employment Index and the very elevated level of the Wages Bill Index suggests the tourism industry is still being impacted by labour shortages and rising labour costs. On a positive note, business investment levels remain elevated despite the uncertain economic outlook. Visitor expenditure in South Australia also continues to grow and visitor yields are increasing, however, these outcomes are due to businesses having to increase prices to pay for increasing costs.
Tourism Industry Council South Australia
Business Activity (Last Three Months)
The main reasons for the positive performance in the June Quarter were:
• Introduced new product or service;
• Increased collaboration with other businesses;
• Travel generally higher than last year;
• Increased digital presence; and
• Adapted product or service.
The main reasons for the negative performance in the June Quarter were:
• Decreased visitors to the area;
• Weaker economy;
• Lack of consumer confidence;
• Decreased rates, prices or visitor spend in the business; and
• Rising business costs
“It’sjustreallytoughatthemoment.” “Regionalflightsaretooexpensive comparedtoaflighttoMelbourne,etc.” “Wearecontinuingtobuildon experiencesandservicestokeep attractingnewcustomers.”
Figure 3: Business Activity in the Last Three Months
Source: Tourism Industry Council South Australia
Business Activity by Market Segment (Last Three Months)
Consistent with the negative result in the headline index, all market segments recorded a net decrease in activity from the March Quarter Conditions were weakest in the conferences and business meetings segment, with just 10% of businesses within this segment reporting an increase in activity, compared to 35% of businesses reporting a decrease.
The holiday / leisure and business segments also remain weak, likely driven by the recent increases in the cost of living, the uncertain economic outlook and the slow recovery in overseas travel.
Figure 4: Business Activity – By Market Segment (June Quarter 2024)
Source: Tourism Industry Council South Australia
Business Outlook (Next Three Months)
The Business Outlook Index remained below the neutral level in the June Quarter. The Index has trended lower since peaking in September 2022 and is likely to stay around current levels while there is so much uncertainty around the outlook for inflation, interest rates and the broader national and global economies.
Figure 5: Business Outlook for the Next Three Months
Source: Tourism Industry Council South Australia
Business Outlook (Next 12 Months)
Results in the June Quarter were weaker than those from the previous March Quarter, with the proportion of businesses ‘extremely worried’ or ‘worried’ rising to 33% in the June Quarter, up from 28% in the March Quarter.
Pleasingly, a majority of businesses (52%) remain ‘extremely confident’ or ‘confident’ in the outlook for their business over the next year, which shows more confidence over the longerterm (compared to the next three months). However, it is important to note that this high level of confidence is well below the long-term, pre-COVID average of 67%.
Figure 6: Business Outlook for the Next Twelve Months
Source: Tourism Industry Council South Australia
Table 1: The Top Factors Influencing the Future Outlook Positive Factors Negative Factors
• Improvement in facilities upgrade;
• Improvement in guest experiences;
• High occurrence of events;
• High consumer spending; and
• Improvement of products
Source: Tourism Industry Council South Australia
“Weareinvestinginupgradingand improvingguestexperiences.”
“Betterplanning,addingeventsanda senseofpeoplespendingmore money.”
• High cost of living;
• Low business investment;
• Less visitors;
• Strong market competition; and
• Low consumer spending
“Lowvisitation,lessspendperhead, consumershavelessdiscretionaryspend.”
“Difficulttogoonaholidaywhen youarestrugglingtopayyour mortgage.”
“Withtherisingcostoflivingandforbusinesses also,wearepredictinglessinvestmentandless visitors.”
Employment and Wages
The Employment Index fell sharply in the June Quarter, with just 8% of tourism businesses reporting an expectation for an increase in employment levels, the lowest proportion since September 2020 (during the COVID-19 pandemic). Further, the proportion of businesses expecting less employees rebounded to 25%. The proportion of businesses reporting increasing wage bills remained very elevated and much higher than the pre-COVID level. The high cost of living was often cited as the main reason for wage increases.
Figure 7: Employment Trends
Tourism Industry Council South Australia
Source: Tourism Industry Council South Australia
Consistent with the Employment Index, data from the ABS Labour Force Survey showed total employment in the accommodation and food services industry fell 5,400 persons to 50,400 in May Quarter 2024 Further, since peaking in November 2022, employment in the industry has now declined for five of the past six quarters, to be cumulatively down almost 15,000 persons (or 23%).
Figure 9: SA Employment, Accommodation and Food Services Industry
Source: ABS Labour Force, Australia, Cat. No. 6291.055.003
Key Challenges for Tourism Businesses in SA
Feedback in the Barometer is now very consistent and demonstrates the very challenging environment that tourism businesses are experiencing. They continue to face increases in several operating costs and a lack of income to pay these costs. Maintaining staff also continues to be a significant challenge in this environment
Figure 10: Key Challenges Facing Tourism Businesses
Source: Tourism Industry Council South Australia
Investment Outlook
Investment intentions remained elevated in the June Quarter, a strong result given poor activity levels in the quarter and the ongoing uncertainty surrounding the business outlook. In fact, businesses planning more future investment were double those planning less in the June Quarter. However, it is worth noting that the June Quarter index level (+119) is slightly below the pre-COVID average (+129).
Figure 11: Planned Investment
Source: Tourism Industry Council South Australia
Statistical Note:
The TiCSA Tourism Barometer June Quarter 2024 survey was conducted online 3-17 July 2024. A total of 114 responses were received, representing a margin of error of +/- 9.2% at a confidence level of 95%.
Airport Passengers
The Adelaide Airport has seen strong passenger numbers in June Quarter 2024, with over 2 million passenger movements. While total passenger numbers remain above pre-COVID levels, 2024 has experienced a relatively stabilised level of passenger movements through the Airport.
Table 2: Adelaide Airport Quarterly Passenger Statistics
Note: Domestic movements include regional.
Source: Adelaide Airport (2024)
Visitation and Expenditure
Visitor expenditure in South Australia has continued to grow, with visitor expenditure now at $10.2 billion in the year ending March 2024, up $860 million from the prior year. The increased visitor expenditure outcome is likely tied to on-going prices increases to address elevated business costs. Growth in visitor expenditure in South Australia is largely in line with the growth experienced in other States.
While all visitor types experienced increases in expenditure, international visitor expenditure saw the strongest increase in the year (both in total and percentage terms), up around $460 million (or 55%) from the previous year. Recent weakness in the A$ exchange rate should also continue to support the recovery in international visitor expenditure in the near-term.
While international expenditure has continued to grow, growth in domestic overnight expenditure (both interstate and intrastate) has slowed, rising just 4% (or $250 million) in the year ending March Quarter 2024. The moderation in expenditure growth from this visitor segment likely reflects the impact of lower household disposable incomes, due to high inflation and rising interest rates, and the uncertain economic outlook.
Figure 12: Visitor Expenditure by Type, South Australia
Note: Year ending March
Source: Tourism Research Australia
Table 3: Visitor Expenditure ($m) by Type (2024)
Note: Year ending March. % change is from previous year.
Source: Tourism Research Australia
For the year ending March 2024, data shows declines in visitor numbers across day-trip and intrastate domestic overnight visitors, but a continued recovery in interstate domestic overnight and international visitors
Declines in holiday / leisure visitation across all visitor types except international visitors is a clear area of weakness for South Australia, which again is likely the result of the rising cost of living reducing household disposable income levels.
While visitor expenditure continues to grow, total visitation remains below pre-COVID (around 14% less).
Table 4: Visitors and Nights by Type, South Australia (2024)
Note: Year ending March.
Source: Tourism Research Australia
Total expenditure across day-trip and intrastate domestic overnight visitors has risen, with higher yields ($/visitor), which has more than offset declines in visitation Conversely, interstate domestic overnight and international visitors saw annual falls in visitor yields that were offset by strong growth in visitor numbers, resulting in overall expenditure growth
In terms of the trends over the medium-term, the strong growth in visitor expenditure in the post-COVID era has been driven by very strong growth in visitor yield (i.e. $/visitor). Total visitation is 14% below pre-pandemic levels, however total expenditure is up 32%, as visitor yields have risen more than 50% over this period. One of the main drivers for the sharp increase in visitor yields is the increase in various input prices that has been occurring (as identified in previous Barometers). Faced with rapidly increasing costs, tourism businesses have been forced to increase their prices, which is reflected in increasing yields and record setting visitor expenditure.
However, tourism businesses may struggle to continue to pass-on these rising costs in the near-term. The current Barometer shows that over 50% of tourism businesses have maintained pricing levels over the (42% of businesses have increased prices).
Recent economic data has shown household consumption nationally has softened considerably in recent quarters, with households forced to tighten their belts under the weight of rising interest repayments and increasing cost of living. The potential for further interest rate increases, potentially as soon as August, could add to the pressure.
Note: NA – not applicable. Year ending March Market share represents the historical market share currently, for the previous year and from three/ten years ago Source: Tourism Research Australia
Report prepared in partnership with Lucid Economics.
Tourism Industry Council South Australia (TiCSA)
Ph: (08) 8110 0123
Email: info@ticsa.com.au
